Industry Committee on April 18th, 2013

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Are there any details you can provide on that funding? Is it for balloons and party hats, or is there something more specific that....

[Robert Dunlop]

Mr. Chair, the funds were used for the ongoing activities of the National Research Council, paying their staff, running their businesses, running their facilities, and conducting the research.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

When would we have a more specific breakdown? Would it be something you could table later that would give us a specific breakdown of what that was used for, or is it just in the general revenues?

[Robert Dunlop]

If I'm being asked if a formal answer could be provided to you, of course.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you.

As part of the NRC transition, we're just wondering the effects on the number of positions, specifically the science or research positions compared to the administrative positions. Last time Mr. McDougall was here, he did say there would be a significant reduction in scientific research personnel. We're just wondering if you could provide an update on that at all.

[Robert Dunlop]

Mr. Chair, I can't provide an update. I suggest Mr. McDougall would be better placed to provide detailed answers on matters pertaining to this.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Perhaps that's something we could do then, have Mr. McDougall come back to the committee and answer those questions about the NRC. I'll leave that with the committee to ponder.

Maybe we can go back to the overall calculations of science and technology spending as I asked the minister, the $9 billion number and how that's calculated. It doesn't look as if inflation is accounted for in that number. Is that something you can confirm as well?

[Robert Dunlop]

Mr. Chair, the government accounting is always done in nominal dollars; that is, the main estimates and votes are all based on nominal dollars, not inflation adjusted. The tables you've seen are....

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

How about the percentage of decline in S and T spending? It's hard when you're looking at nominal figures, because it always keeps growing and growing and growing and that's why we inflation adjust. Actually Statistics Canada does that for us in particular tables. I'm just wondering if there is any part of reports where that would be formally reported, or is that something members of the public have to do themselves?

[Robert Dunlop]

Mr. Chair, if the question is about the information available from Statistics Canada, as you say, it provides both nominal and inflation adjusted, depending on which particular table you're looking at. That information is widely available.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Maybe we could go back to the planning and priorities report that we talked about before, and that's the advancement in science and technology. So, we have the actual spending in 2010-11 as $1.3 billion declining to $414 million. I know there are some projects that still have to be funded or approved by Treasury Board to be added into this table, but will the funding ever come close to hitting the 2010-11 level?

[Robert Dunlop]

I did pull together the information on the differences. As the minister was saying, the primary elements there we're taking out of KIP, the temporary program, which was $1 billion a year. There are a few other programs that are set for review. The funding that was provided for quantum computing and for the Ivey centre, which were announced, could be reviewed and perhaps renewed, but they are not included because that's a decision to be made in the future.

There are also a few elements that are missing from the 2015-16 figure that have since been announced. They include the $500 million for CFI which, although announced in last year's budget, because fund flow was to start in 2014-15 wasn't included until now. That has been announced and will be confirmed shortly. Also not included is the $165 million for Genome Canada and the $13 million for Mitacs. Obviously I can't say what the budget for science and technology will be in 2015-16, but I can tell you there's a large number of elements that are in place that would make that gap a lot smaller than [Inaudible--Editor].

[The Chair, Conservative, David Sweet]

Mr. Braid, you have five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Mr. Archibald, in response to an earlier question you mentioned that between now and when the mandate for FedDev is renewed, about a year from now, you'll be carrying out extensive consultations with respect to what the renewed FedDev will look like. You must have a sense today of what's worked well so far. Could you tell us what you think has worked well, given the FedDev mandate?

[Dr. Bruce Archibald]

Thank you for the question, Mr. Chair.

One interesting thing about this regional agency is that it operates in a very large and diverse economy, in Canadian terms, with a real GDP somewhere in the neighbourhood of $600 billion and a very diverse economic base. One thing is that in consultations with various stakeholders and obviously through Minister Goodyear's guidance and direction, we have tried to make our investments in areas in which we can foster partnerships and try to improve the productivity piece, as well as build communities, and also look for opportunities involving gaps in the landscape of the various players.

I think we've been very successful in helping bring a large consortium together, with ideas on projects that can make a difference in the transformation of the economy in southern Ontario. One example is that there is a fair bit of understanding and expertise in the area of water management, water conservation, purification, a number of those issues.

Early on we had a number of applications from various players to look for pieces of that puzzle. We worked very hard with a number of industries as well as universities to build a much stronger and larger proposal, one that involved several universities and a number of private sector partners and that leveraged a considerable investment and actually made a significant investment in the area of water technology in southern Ontario. This is the model that we think is the way to make a real difference. We have done smaller investments with specific companies, but I think some of the transformational pieces are in these areas.

That's one example. The other area is in communities.

Clearly, a number of communities were seriously impacted as a result of the economic downturn and have worked hard to try to reinvent and think about where they need to go on a going forward basis. We've worked very diligently with a number of them.

Windsor is an example, in which, in a very large area that was largely dependent on auto assembly, the jobs left. How does it recreate itself? Working with the community, the mayor, the local universities, and the local Chamber of Commerce came together with a couple of very credible plans on a going forward basis, and we made some investments in those areas.

Recently we've done some work in the Niagara region, which is similar in those areas.

Then the last area, which the minister referred to, is the area of early stage financing. We heard a lot in the round tables about access to capital having disappeared, so we looked at some opportunities to see what we could do to encourage people to come back into that market, to make more investment in creating Canadian companies. Those things have gone well.

This is community activity built up by the community itself whereby we help bring a large consortium together in areas in which there are known gaps to try to work in those areas. That has really been our emphasis.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

That's a great segue to my next question.

Of course, FedDev was created with the mandate to support economic growth, create jobs, and foster innovation.

Do you have any specific metrics to share on how you've been achieving those goals as part of your mandate?

[The Chair, Conservative, David Sweet]

Be very brief, please, Mr. Archibald.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

But it's such a good question.

[Voices]

Oh, oh!

[Dr. Bruce Archibald]

We develop an evaluation plan for the agency. We have looked at a number of different evaluations in various parts of our programs. While these are still early days for the organization, there has been some significant improvement in job creation activities in those kinds of areas.

So the answer is yes, and I think we have gotten some positive feedback.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Archibald.

Now we go on to the second five-minute round moving to Mr. McColeman for five minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Mr. Chair.

I'd like to pick up on what the minister talked about in terms of the tremendous growth in the support of angel capital funding and get your points of view from your various parts of the equation in carrying out the mandate for FedDev. Could you give us some examples, and they may not be measurable or empirical data, that you can put your fingers on immediately, but just a sense of how that private capital growth has happened? Could you perhaps give us some of the reasons why you believe it has happened?

[Dr. Bruce Archibald]

Mr. Chair, I'm going to ask Clair Gartley to respond to that one.

[Clair Gartley]

Thank you for the question.

As Dr. Archibald mentioned, this is one of the areas we identified early on in the agency that we felt was a place where we could play a role in making a change. Angel capital has declined quite substantially in Ontario. It was difficult for good ideas, good businesses, to find the capital they needed to get going.

It took a number of things. A strong innovation ecosystem was encouraging people to start up businesses and look at commercializing new IP and new technology. That was happening as there were various things at play. Certainly it's something that communities, post-secondary institutions, and the province were very involved in.

To address the capital issue we had a lot of discussions with some of the existing angel networks and some of the key venture capitalists in southern Ontario. We heard from them that if we helped them in matching some of the capital they put in to these companies, that would encourage more activity. We devised a program called investing in business innovation, which was launched a couple of years ago. We now have funded over 80 start-up companies through that program with repayable contributions, repayable loans. Our funding is one-third of the total cost of the project, up to $1 million.

The unique thing about the program, though, is that these start-up businesses have to come to us first with either angel or venture capital, or both types of funding in place. We're not picking them. They're being picked by the investment community as good prospects and then they come to us. Then if everything's in place, we put in our one-third of the funding.

The model has worked, I think, because stakeholders had a lot to do with it and because the timing was good. It was really needed. It's generated a lot of response.

The interesting thing early on was we thought most of the funding would come from angels, private individuals who are working perhaps in a network and investing in these start-ups. As time went on, the venture capital community joined in. About half the funding that's gone into these over 80 start-up companies is from the venture capital community and the other half from angels.

[Phil McColeman, Conservative, Brant, ON]

The work you've done is a tremendous success story. I owned my own business and I have a background in that area. This is one of the issues that small and medium-size businesses deal with in particular: when you want to go to the next level, how do you generate the dollars to do that?

I guess the next step in the questioning here would be, do you see that as being a strong component as you move forward, as you look at the next five-year funding envelope that budget 2013 has laid out?